Ryan Miles is used to coping in turbulent times. The new managing director of Heidelberg UK (and the Nordics for that matter) has come from South Africa which remains a country in political transition and where turbulent times can be the norm. “We could have currency swings of 20% from one day to the next,” he says.
We are talking not in his office, but on the more casual seating on the gallery above the Heidelberg showroom in Brentford. When coffee is delivered, it is in disposable cups, not china. If Miles were a politician this would be a signal that he is rolling up his sleeves to get on with the job.
And in a way this is exactly what he is doing. Change is coming. “This is a difficult time to come in,” he says, referring to the UK political scene. “This has made it difficult for customers over the last 12-18 months to plot a way forwards. And there is also the change in approach from Heidelberg that customers have to start to understand.
“Coping with this amount of change over a short period is challenging. But I have experience of managing uncertainty in times of uncertainty.”
He can do little about the political situation, but points out that this is happening against the background of a strong economy where packaging in particular is thriving. “And in the commercial sector the consolidation of the last ten years appears to have slowed down and we have larger industrialised commercial printers. It’s part of the global evolution that the industry is going through because of IoT and the effect that this has and its potential for a lot of customers.
“In many ways this is the perfect time to join.” Or in the case of Gerard Heanue, whose decision to take an early retirement created the gap, to depart.
Heidelberg’s CEO Rainer Hundsdörfer has been insistent that Heidelberg must become a digital company and has now made acquisitions to this end. This is not about extending the portfolio of digital presses (though that is happening) but about embracing a new way of looking at what Heidelberg does and how it does it. This is no longer a company that produces superbly engineered printing presses which are sold and maintained through subsidiaries around the globe. Heidelberg intends to deliver these machines, but along with the support and know-how to help printers get more from them. And as they do, Heidelberg benefits.
This is the promise of the subscription model, a new way of ‘paying by results’ for a printing press. It is a way for less productive printers to get a new machine and help them to become more efficient and for Heidelberg it is a means to achieving the more predictable revenue stream that investors love.
To date there have been no takers for the subscription contract in the UK though there have been deep conversations and the first sign up is not far off. When introduced the appeal in the UK was limited because productivity rates are among the highest in the world thanks to the competitive nature of the market. And where Heidelberg has achieved perhaps its highest market share of any advanced economy.
The initial proposal has been modified. The subscription model can apply to software, to lifecycle spending (consumables and service) as well as to capital equipment. Heidelberg can join these together in ways that are beyond companies that operate only in prepress, presses or finishing. These suppliers have to protect and promote their own interests. Heidelberg because it reaches the parts other manufacturers cannot reach, can put the interests of the print business first.
Miles continues: “Subscription is now applicable to a much larger part of the market. The first customers that have signed up all report productivity increases which is a core part of the model and demonstrates what we can bring to the customer with our solutions. It is a change in the way that we transact with customers.”
That is already happening. Due perhaps to the uncertainty pervading the country, perhaps because print is in decline against the online onslaught and because the choice of technologies is greater, the decision cycle is being drawn out. Equipment remains in production for longer because quality and reliability are not declining the way they used to. Subscription may be a way to overcome some of the investment inertia.
The old model of owning a press and using its residual value as deposit on the next machine or as a retirement fund for the Costa del Litho is dissolving. The younger generation has less attachment to the press in all its engineering finesse, but sees it as a means to an end. Given that with shorter print runs and faster running speeds, the share of time from file to delivery that is spent on the press, is rapidly diminishing, this is hardly surprising. The press is a means to an end not the end in itself.
This is happening in other industries says Miles. “When we spoke to finance companies about what we planned to do to get them on board, they told us that this is happening across a lot of capital intense industries. They understand and are happy with the model.”
The airline industry is often cited as one comfortable with the pay by use model. It incentivises the manufacturers to keep their engines in top condition to maximise flying hours and so revenue. It also applies in machine tools and medical equipment where the capital cost is rising beyond the ability of a balance sheet to support the large investments.
There is also an element of growing market demand built into the concept, hence Heidelberg’s emphasis on integration from cradle to delivery of the job.
This will mean changes in the way that Heidelberg works with customers. The emphasis is not on the specifications of the machine, though these remain important, but on the correct fit of workflow and then machinery to the customer. “We have to understand better the value this can bring to customers. It’s new and exciting, but it’s a business model that the world is changing into.”
Thus there is no table d’hote menu for a customer to select from. Everything is à la carte. “It’s a consultative approach based on gaining a deep understanding of what the customer’s strategy is moving forwards and for us to work out how we can add value to them,” he says.
“Printers spend a lot of time sourcing and comparing machines from different manufacturers, negotiating the best deals for ink and other consumables and dealing with a multiple of other suppliers driving into the business.”
And if they do there is still the question of how to knit these together to achieve a seamless integrated result, whether this be in the flow of the file through the factory, the data being retrieved to identify bottlenecks and other places where productivity might be improved or to be comfortable that plates, inks, founts and press are in complete balance. And which supplier to call when things do not operate as expected. It is all inward looking, ensuring production is set up correctly when the company should be focused on serving its customers.
This is what Heidelberg is in the business of changing. “It’s about improving efficiency, about reducing the touch points and helps a customer concentrate and spend more time on their business and their customers’ business,” says Miles. “That is also becoming quite demanding and challenging.
“With the subscription model they have a partner who has a vested interest in helping them improve their production and efficiency.” After all if a company is printing more sheets, it is using more Saphira consumables to do so and feeding revenue back to Heidelberg.
This type of approach where the focus is no longer the press or folder, but the overall well being of the user is what printers need also to be focusing on says Miles. “It’s about moving away from pushing a product to a printer to forming a relationship where we are putting the customers needs first in terms of what their business needs might be.”
It requires a change in thinking for these customers, and a younger generation now rising to take command of family print business is showing that change in outlook. It is about the sheets that are delivered and not being hung up about the residual value of the asset. In a model where the press is owned every sheet print carries that depreciation as part of its cost (or should do). Under the new thinking, because the printer does not own the asset, each sheet is less expensive to produce. That means it carries more margin, or just as likely, it is a weapon that can be used to undercut a rival, perhaps with a different press supplier.
The evidence from more than 30 contracts in place is that it is working. “There have been efficiency increases in excess of 20% in every case,” says Miles. None of these are in the UK. That will change. Several discussions are at an advanced stage he says. They may not necessarily be about a press installation. Heidelberg is quite prepared to mix the offer. It can begin with software, lifecycle services and a press can be added at the time that a machine needs to be replaced.
“Prinect is offered on subscription basis which means that instead of buying multiple licences, there is one fee to cover everything,” he says. This also helps keep users on the same level of software for ease of support. “There are also 30-35% of user transacting through the e-commerce portal so there is scope for growth as this percentage is low for the UK in general. Our intent is to move that closer to 70% by the year end.
“We are taking many steps to change how the customer interacts with Heidelberg. It is about more than communication with a press. We can talk to the print factory from arrival of a file until delivery two or three days later, with a minimal amount of time spent on our press. We are the only company that has the reach and access to such data.”
Where the machinery is too old to have a direct machine interface or from a non Heidelberg source, scanning the bar codes on each sheet can identify the job, its start and finish point.
The Heidelberg Assistant is a remote way of monitoring this progress via tablet computer to present whatever data is permitted or required. Again the UK is currently lagging. Of the 100 companies using Heidelberg Assistant and 1,400 devices linked, none is yet in the UK where it will be introduced “very soon”. The breakthrough that this represents earned Heidelberg the recent Stationers’ Innovation Award for 2019.
Assistant is a window into Prinect Production Manager, the overall workflow controlling the movement of a job, what happens to it and the data flowing back as each production stage is passed.
It also means that data flows back to Heidelberg. “We can interpret this data in ways that we were not able to measure before, taking data from many different sources. We have made it easier for printers to get all that data in one place,” he says.
And that data will continue to grow as Heidelberg connects with the world. This was one of the drivers to the acquisition of Crispy Mountain. The Keyline MIS is part of the deal, but the real driver was the access to APIs and the ability to link to the likes of SAP, to Salesforce and to any other technology platform. It has, it is said, accelerated this by four years for the press manufacturer. “Crispy Mountain is all about platform development for the Internet of Things. Our Prinect Business Manager MIS will not be changing as a result.”
In the past Heidelberg has wanted to hold all the strings, developing and delivering the solutions to its customers and keeping them within the walled garden as much as possible. Taking an open systems approach is a very different. “It’s a completely different way of thinking,” says Miles. “We have to become a lot more customer centric as an organisation. There are many steps to change how a customer interacts with Heidelberg.”
The focus is shifting to helping the printer as a business, thanks to being able to collect and present all the data, something that only Heidelberg has the reach to do Miles says. “Business owners should be looking at overall productivity and efficiency not being concerned about which ink to use.”
Away from the UK there are now websites for labels and for cartons and the recent introduction of a wedding stationery package that should help drive pages for smaller printers that have not yet set up these internet portals.
If the new digital Heidelberg is about changing how the company works with customers, it means considerable cultural change for Heidelberg’s people at all levels of the organisation. “We have to understand our customers business better if we are going to sell subscription. The customer has to have an enhanced experience of dealing with Heidelberg.
“And we have to change in Heidelberg UK because without it we are not geared to delivering these new business models. Every customer touch point at Heidelberg has to understand that and deliver an elevated customer experience. We have to have One Voice to the customer.” The workshops and training are being put in place for later this year.
It has the foundation: a strong and experienced workforce which delivers the service levels needed.
But more is required and will continue to be required as the pace of change shows no sign of slowing. The Internet of Things, Big Data will be a huge theme at Drupa next year and as much a focus for Heidelberg as new press technology (and Miles hints at new technology to see “We hope to have something exciting in the B2 space”). This will spill over to the showroom in Brentford.
“There are no plans to relocate,” he says, “but customers should come in here and experience what is possible; they should be able to talk through that solution that suits them. It is absolutely necessary to experience what we are talking about in reality.”
By Gareth Ward
Ryan Miles is relaxed about the challenge ahead. His task in the UK will include changing the culture which is focused on machinery sales into a model that is about partnership.
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The days of break and fix for servicing machines are at an end. Instead data will identify and schedule maintenance visits to keep productivity high. The data from Prinect will be compared with other data to help spot problems before they arise.
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Tablets can be used to order from the Heidelberg Shop and as the interface for Heidelberg Assistant, a technology for remote viewing of what is happening in the factory. It was recognised with the Stationers' innovation Award this year.
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